First of all, look at your total gross income. This is the combined income of you and your spouse. Typically, most households will have a double income. After you have determined your combined family income, you can start breaking down the numbers.
I have a sample of what that might look like for the average family household. But remember, this is a guideline only, not a legalistic sort of document that you have to follow to a tee.
Begin with your gross family income and take 10 percent right off the top for God. Your tithe is important, and God must come first in your financial life. After God comes the IRS. They will take out their percentage whether you ask them to or not.
Disposable Income
The amount you're left with is called your disposable income. This is the amount of money you will need to budget in order to manage your household expenses.
First of all, you can't spend more than 100 percent of your income. That should be a no-brainer, but we deal with people all the time who have no idea what their expenses are compared to their income. Consequently, their expenses are consistently anywhere from 20, 50, or even 100 percent more than they earn.
You cannot do that and be a faithful steward according to 1 Corinthians 4. It's your responsibility to manage your expenses within your level of income. Only when you do that will you qualify for promotion and increase.
Now, realistically, your mortgage will take up about 45 percent of your disposable income. However, with all the taxes, insurance, and utility costs, you may want to allocate more like 50 or 55 percent toward your house payment if you can afford it.
If you decide to do this, you'll end up taking 5 or 10 percent away from something else.
Other Expenses
Next is the car payment. That usually requires 15 percent of your disposable income, depending on whether your car or cars are used or new. Insurance and warranties need to factor into that as well. Another 15 percent needs to come out for food, which means you may not be able to eat steak two or three times a week, and you probably won't be able to take the family out to dinner two or three nights a week, either.
It's fascinating to me that when I go into grocery stores, I find the cheapest things to buy are the things that are good for me. The things that are bad for me—ice cream, bakery items, crackers, chips, and soda—are all expensive compared to things like fruits and vegetables. If we eat what's good for us, we'll not only be able to buy more, but also feed our family more nutritionally.
As for the other number breakdowns, I allotted 4 percent for clothing. The amount allotted for clothing is one thing that I acknowledge must be measured according to the call of God on your life. For example, if God's got you in a highly visible position where people are constantly measuring and evaluating you according to your appearance, then you need to spend more money for clothes.
After clothing, allot about 3 percent for other debt, including insurance costs such as medical and dental coverage. It's important that you have insurance. It's not fair or appropriate for you to risk your family's financial welfare on how strong a man or woman of faith you are.
You can't just say, "I don't need any insurance. I'm not going to get sick or disabled. That's unbelief! I'm not going to die; God's promised me long life."
Yes, He has! If we were all at the stage of perfection where we no longer made mistakes, thereby opening the door to the devil, we would never need insurance. It's a matter of being responsible, providing for our own, and acknowledging our fallibility.
You should love your family enough to have life insurance and plans for funeral expenses. I'm not suggesting that you go out and buy a huge life insurance policy when your funds are tight, but consider the cheapest term insurance you can find and buy that.
Be sure you have mortgage cancellation insurance. Purchase something as inexpensive as possible until your increase has come, then you can afford a little more and provide some basic assurances for your family. Part of being responsible in providing for your own.
Other Categories
After insurance, the next three categories of importance are savings, recreation, and miscellaneous. I encourage everyone to take savings seriously. It's important that we discipline ourselves to save money.
I'm not suggesting you save money for a rainy day—that's how you get rainy days. But sooner or later a project will come along, whether it's the kid's college education fund or some future need, and you will want to start making provision for it now.
There are some needs we must address today, and there are some needs we must look at down the road. Begin planning for those now. Saving is a good discipline, and it gives us padding if there is an unexpected contingency.
Another area that is often overlooked is recreation. We need to have money set aside for recreation. I don't care how tight your budget is, you need to bring your kids up with the idea that life is fun and enjoyable—not just a drudgery in which you try to make it from one day to the next.
You don't have to do expensive things, but they should be fun. Put some thought into it, and get creative. For example, it doesn't cost much of anything to go camping, fishing, or hiking in the woods, and it's a lot of fun.
Experiences like these can bring you closer together as a family, and that's worth its weight in gold.
The last item to budget is the miscellaneous category. Invariably, unforeseen things pop up that require money. Just like we can't schedule our time right to the minute, we can't schedule our money right to the dollar either.
Unexpected contingencies do come up. So, it's necessary to add money to the miscellaneous fund from week to week just in case we need to use it. Unexpected needs do arise, so be prepared for them.
Living within a budget doesn't have to be a lifelong condition. If you do it now, God will promote you and financial increase will come. Be absolutely determined to follow a plan, and God will reward you.
Excerpt permission granted by Harrison House Publishers